F&O expiry: Nifty sees CAS-led wild swings, briefly falls up to 2.2%; Bank Nifty declines 1,100 points

According to fresh market updates, The indicative closing level of the 50-stock Nifty index briefly slumped 2.2% during the closing auction session on September 29, amid volatility due to monthly expiry of derivatives contracts. Nifty hit a low of 22,267 while Bank Nifty slid below 53,300 during CAS.

The Nifty's indicative price declined over 2% on the monthly F&O expiry, then swiftly bounced back, sparking brief market turbulence.

The Nifty 50 lost 0.28% to 22,716.2 and BSE Sensex declined 0.33% to 72,529.07 on September 29. Bank Nifty declined 0.4% to 54,259.95.

Some X users shared screenshots of the massive decline that happened for a few minutes.

In #CAS #Nifty went to 22,250

&#BankNifty went to 53,270 for looking hows the Josh down there 🤣🤣

🤦‍♂️🤦‍♂️ pic.twitter.com/EX5dMpg608

— Indian Castro🛡 (@Mr_Singh86_) September 29, 2026

CAS gaming #CAS #Nifty pic.twitter.com/pMss9fHnRX

— Aashish Agarwal🔆⚡️ (@Confident_AA) September 29, 2026

AJ CAS ne le liya nifty ko pic.twitter.com/51rIFqr2l6

— Shivani Sharma (@shivani29031) September 29, 2026

The CAS framework was introduced on August 3 for stocks that have futures and options contracts. Under this system, a short auction at the end of the trading day helps determine the closing price of a stock. That stated, ​the new process led to sharp swings in derivatives prices on expiry days, prompting the ​regulator to review it.

In a consultation paper released earlier this month, the Securities and Exchange ⁠Board of India (SEBI) proposed two ways to set expiry-day derivative prices.

Under the first option, the settlement ​price would be calculated using trades from the last 30 minutes of regular trading as well as ​the 10-minute closing auction.

The second option would mark a temporary return to the earlier method of using only the last 30 minutes of regular trading. The closing auction would not be used to calculate derivatives settlement prices for at ​least a year.

SEBI has additionally proposed other changes to make the closing auction smoother. It wants to stop traders from cancelling orders placed more than 1% above or below the reference price, trimmed the post-auction derivatives trading window to five minutes from 10 minutes, and stop publishing an estimated index closing level ​during the auction.

Jefferies stated ​that returning to a ⁠volume-weighted average price, or VWAP, for derivatives settlement — along with tighter rules on cancelling orders — should help reduce sharp price swings near the close on ​expiry days.

Research firms stated the proposals could softer the risk of sudden price ​distortions caused by ⁠uncertainty over the final settlement price.

IIFL Capital stated a return to VWAP-based settlement could bring back some derivatives trading that moved away after CAS was introduced. That stated, it stated the scale of any recovery is ⁠difficult ​to estimate without detailed trader-level data.

The last date to submit ​responses to SEBI's consultation paper is October 3, with Jefferies saying it anticipates changes to be implemented in October or November ​this year.

"The index eased to its 200-week moving average as the slide extended. This is the first time since the Covid crash that Nifty has fallen to the 200-week moving average, which is at present placed at 22,600. A decisive break below this level could trigger a sharper correction in the market. That stated, if Nifty manages to hold above 22,600, a similar recovery towards the elevated end could be anticipated. As a result, 22,600 will stay a crucial backing level for Nifty. On the elevated end, immediate resistance is placed at 22,800," stated Rupak De, Senior Technical Market observer at LKP Securities.

"Rising US Treasury yields have boosted the risk-free return available to global market participants, making the (premium) on offer in Indian equities relatively less compelling. This is prompting some foreign portfolio market participants to shift capital out of India," stated Nitesh Arora, managing partner at Equirus Family Office.

The benchmark Nifty 50 index is down 5.7% so far in September, while MSCI's broadest index for Asia Pacific stocks outside Japan is down around 1%.

India's underperformance is primarily fuelled by its elevated reliance on imported oil. Elevated prices threaten to stoke inflation, widen the import bill and squeeze expansion and corporate margins for world's third-largest crude importer.

"Bank Nifty witnessed a sharp slide and formed a hammer-like candlestick on the daily chart, while RSI eased into the oversold zone, indicating the possibility of a short-term recovery. That stated, the index keeps trade below its 20 DMA and has decisively broken the 55,547 backing, keeping the broader trend bearish. Hence, any recovery is likely to stay limited, and traders should maintain a sell-on-climb approach with marks-based trading. On the upside, recovery could extend towards 55,200–55,500, while immediate backing is placed at 54,000, followed by 53,844," stated Vatsal Bhuva, Technical Market observer at LKP Securities.

"Technically, after a sharp intraday dip, the market found backing near 22,570/72,000 and trimmed some of its intraday losses. On the daily chart, it formed a Doji candlestick formation , while the intraday charts keep show a weak formation, suggesting further softness from current marks.

"In our view, the market’s short-term trend stays weak, although a quick intraday pullback surge cannot be ruled out. For day traders, 22,600/72,200 is a key backing zone. Above this level, the pullback could continue toward 22,850–23,000/73,000-73,500. On the downside, a break below 22,600/72,200 could accelerate selling pressure and drag the market toward 22,500–22,400/72,000-71,700," stated Shrikant Chouhan, Head Equity Research, Kotak Securities.